What Will the New Financial Year Look Like for The Property Market?
If ever there was a need for a case study about property market cycles, the past 18 months would pose as a great demonstration. After a soft start to the 2019 calendar year, the stage was set for a very underwhelming FY 2020.
Last year, positivity had returned before COVID-19
However, the start of FY20 saw the hangover from the banking royal commission begin to lift. We saw lending restrictions begin to ease, investor confidence rose, and the RBA started reducing the official cash rate. The combination of these factors saw auction clearance rates shift from the low 40%’s in early 2019 to mid 60% at the beginning of FY20. This shift gained momentum over the second half of 2019 providing an air of optimism for the spring and Christmas period.
Roll on to 2020 and this optimism became a recovery with auction clearance rates in the high-70%’s and even vendor confidence returned with listings pushing above the 10- year average, for the first time in a long time.
Positivity had returned to property markets just in time for Autumn, but then March 2020 is when COVID-19 brought everything to a shuddering halt. Lockdowns were enforced, open homes cancelled, and vendors began to withdraw properties from the market.
When lockdowns lifted, it was slow but buyers were curious and they started to turn up to opens and book inspections, which in turn resulted in a significant amount of sales transacting.
Buyer demand should remain elevated
So, where we are now? Buyer demand, particularly from first home buyers and occupiers, remains elevated. They are out looking to take advantage of record-low interest rates, and some are out to hunt down a bargain. The real issue is listings, which have been slow to return. This unevenness between demand and supply has seen prices and values hold up.
Looking ahead, what do we expect for FY21? The biggest unknown remains: COVID. Will the current outbreak cause further restrictions across the country or will markets remain open? The most important question is what will happen to the economy and property market once the government stimulus and bank mortgage deferral measures wind down.
We expect banks to continue to support borrowers, as they return to work and business returns to normal. However, not everyone will be able to pay their mortgage, and unemployment is expected to remain elevated.
More properties to come onto the market in spring
Homeowners looking to sell to relocate or “resize” and those facing mortgagee difficulties will inevitably cause more properties to come onto the market as we head into spring.
On a positive note, we know that with interest rates at record lows there will be buyers ready, and willing, to purchase these properties as they come onto the market. We are seeing it now, and it will go some way to soak up some of these listings.
Original Blog Post: Mathew Tiller ljhooker.com.au on July 15 2020